(a) The net profit for the year.

Question

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Answer 1

Question

Chapter 17, Problem 25P

To determine

(a)

The net profit for the year.

Expert Solution

Answer to Problem 25P

The net profit for the year is $47.5 M.

Explanation of Solution

Calculation:

Calculate the total revenue.

Total Revenue=(Operating Revenue)+(Non Operating Revenue) ...... (I).

Substitute $124 M for Operating revenue and $36 M for Non Operating Revenue in Equation (I).

Total Revenue=$124 M+$36 M=$160 M

Write the expression to calculate the total expenses.

Total Expenses=(Operating Expenses)+(Non Operating Expenses) ...... (II)

Substitute $70 M for Operating Expenses and $35 M for Non Operating Expenses in Equation (II).

Total Expenses=$70 M+$35 M=$105 M

Write the expression to calculate the profit before taxes.

Profit Before taxes=(Total Revenue)−(Total Expenses) ...... (III).

Substitute $160 M for Total Revenue and $105 M for Total Expenses.

Profit Before taxes=$160 M−$105 M=$55 M

Calculate the profit after tax

Profit after tax=$55 M−$7.5 M=$47.5 M.

Conclusion:

Thus, the net profit for the year is $47.5 M.

To determine

(b)

The income statement.

Expert Solution

Answer to Problem 25P

The income statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Explanation of Solution

Calculation:

Make the Income Statement Table.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Conclusion:

Thus, the Income Statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

To determine

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

Expert Solution

Answer to Problem 25P

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Explanation of Solution

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

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Answer 2

Question

Chapter 17, Problem 25P

To determine

(a)

The net profit for the year.

Expert Solution

Answer to Problem 25P

The net profit for the year is $47.5 M.

Explanation of Solution

Calculation:

Calculate the total revenue.

Total Revenue=(Operating Revenue)+(Non Operating Revenue) ...... (I).

Substitute $124 M for Operating revenue and $36 M for Non Operating Revenue in Equation (I).

Total Revenue=$124 M+$36 M=$160 M

Write the expression to calculate the total expenses.

Total Expenses=(Operating Expenses)+(Non Operating Expenses) ...... (II)

Substitute $70 M for Operating Expenses and $35 M for Non Operating Expenses in Equation (II).

Total Expenses=$70 M+$35 M=$105 M

Write the expression to calculate the profit before taxes.

Profit Before taxes=(Total Revenue)−(Total Expenses) ...... (III).

Substitute $160 M for Total Revenue and $105 M for Total Expenses.

Profit Before taxes=$160 M−$105 M=$55 M

Calculate the profit after tax

Profit after tax=$55 M−$7.5 M=$47.5 M.

Conclusion:

Thus, the net profit for the year is $47.5 M.

To determine

(b)

The income statement.

Expert Solution

Answer to Problem 25P

The income statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Explanation of Solution

Calculation:

Make the Income Statement Table.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Conclusion:

Thus, the Income Statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

To determine

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

Expert Solution

Answer to Problem 25P

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Explanation of Solution

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

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Answer 3

Question

Chapter 17, Problem 25P

To determine

(a)

The net profit for the year.

Expert Solution

Answer to Problem 25P

The net profit for the year is $47.5 M.

Explanation of Solution

Calculation:

Calculate the total revenue.

Total Revenue=(Operating Revenue)+(Non Operating Revenue) ...... (I).

Substitute $124 M for Operating revenue and $36 M for Non Operating Revenue in Equation (I).

Total Revenue=$124 M+$36 M=$160 M

Write the expression to calculate the total expenses.

Total Expenses=(Operating Expenses)+(Non Operating Expenses) ...... (II)

Substitute $70 M for Operating Expenses and $35 M for Non Operating Expenses in Equation (II).

Total Expenses=$70 M+$35 M=$105 M

Write the expression to calculate the profit before taxes.

Profit Before taxes=(Total Revenue)−(Total Expenses) ...... (III).

Substitute $160 M for Total Revenue and $105 M for Total Expenses.

Profit Before taxes=$160 M−$105 M=$55 M

Calculate the profit after tax

Profit after tax=$55 M−$7.5 M=$47.5 M.

Conclusion:

Thus, the net profit for the year is $47.5 M.

To determine

(b)

The income statement.

Expert Solution

Answer to Problem 25P

The income statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Explanation of Solution

Calculation:

Make the Income Statement Table.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Conclusion:

Thus, the Income Statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

To determine

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

Expert Solution

Answer to Problem 25P

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Explanation of Solution

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

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Answer 4

Question

Chapter 17, Problem 25P

To determine

(a)

The net profit for the year.

Expert Solution

Answer to Problem 25P

The net profit for the year is $47.5 M.

Explanation of Solution

Calculation:

Calculate the total revenue.

Total Revenue=(Operating Revenue)+(Non Operating Revenue) ...... (I).

Substitute $124 M for Operating revenue and $36 M for Non Operating Revenue in Equation (I).

Total Revenue=$124 M+$36 M=$160 M

Write the expression to calculate the total expenses.

Total Expenses=(Operating Expenses)+(Non Operating Expenses) ...... (II)

Substitute $70 M for Operating Expenses and $35 M for Non Operating Expenses in Equation (II).

Total Expenses=$70 M+$35 M=$105 M

Write the expression to calculate the profit before taxes.

Profit Before taxes=(Total Revenue)−(Total Expenses) ...... (III).

Substitute $160 M for Total Revenue and $105 M for Total Expenses.

Profit Before taxes=$160 M−$105 M=$55 M

Calculate the profit after tax

Profit after tax=$55 M−$7.5 M=$47.5 M.

Conclusion:

Thus, the net profit for the year is $47.5 M.

To determine

(b)

The income statement.

Expert Solution

Answer to Problem 25P

The income statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Explanation of Solution

Calculation:

Make the Income Statement Table.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Conclusion:

Thus, the Income Statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

To determine

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

Expert Solution

Answer to Problem 25P

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Explanation of Solution

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

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Answer 5

Chapter 17, Problem 25P

To determine

(a)

The net profit for the year.

Expert Solution

Answer to Problem 25P

The net profit for the year is $47.5 M.

Explanation of Solution

Calculation:

Calculate the total revenue.

Total Revenue=(Operating Revenue)+(Non Operating Revenue) ...... (I).

Substitute $124 M for Operating revenue and $36 M for Non Operating Revenue in Equation (I).

Total Revenue=$124 M+$36 M=$160 M

Write the expression to calculate the total expenses.

Total Expenses=(Operating Expenses)+(Non Operating Expenses) ...... (II)

Substitute $70 M for Operating Expenses and $35 M for Non Operating Expenses in Equation (II).

Total Expenses=$70 M+$35 M=$105 M

Write the expression to calculate the profit before taxes.

Profit Before taxes=(Total Revenue)−(Total Expenses) ...... (III).

Substitute $160 M for Total Revenue and $105 M for Total Expenses.

Profit Before taxes=$160 M−$105 M=$55 M

Calculate the profit after tax

Profit after tax=$55 M−$7.5 M=$47.5 M.

Conclusion:

Thus, the net profit for the year is $47.5 M.

To determine

(b)

The income statement.

Expert Solution

Answer to Problem 25P

The income statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Explanation of Solution

Calculation:

Make the Income Statement Table.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Conclusion:

Thus, the Income Statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

To determine

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

Expert Solution

Answer to Problem 25P

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Explanation of Solution

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Answer 6

Chapter 17, Problem 25P

To determine

(a)

The net profit for the year.

Expert Solution

Answer to Problem 25P

The net profit for the year is $47.5 M.

Explanation of Solution

Calculation:

Calculate the total revenue.

Total Revenue=(Operating Revenue)+(Non Operating Revenue) ...... (I).

Substitute $124 M for Operating revenue and $36 M for Non Operating Revenue in Equation (I).

Total Revenue=$124 M+$36 M=$160 M

Write the expression to calculate the total expenses.

Total Expenses=(Operating Expenses)+(Non Operating Expenses) ...... (II)

Substitute $70 M for Operating Expenses and $35 M for Non Operating Expenses in Equation (II).

Total Expenses=$70 M+$35 M=$105 M

Write the expression to calculate the profit before taxes.

Profit Before taxes=(Total Revenue)−(Total Expenses) ...... (III).

Substitute $160 M for Total Revenue and $105 M for Total Expenses.

Profit Before taxes=$160 M−$105 M=$55 M

Calculate the profit after tax

Profit after tax=$55 M−$7.5 M=$47.5 M.

Conclusion:

Thus, the net profit for the year is $47.5 M.

Answer 7

Chapter 17, Problem 25P

To determine

(a)

The net profit for the year.

Answer 8

Expert Solution

Answer to Problem 25P

The net profit for the year is $47.5 M.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Calculation:

Calculate the total revenue.

Total Revenue=(Operating Revenue)+(Non Operating Revenue) ...... (I).

Substitute $124 M for Operating revenue and $36 M for Non Operating Revenue in Equation (I).

Total Revenue=$124 M+$36 M=$160 M

Write the expression to calculate the total expenses.

Total Expenses=(Operating Expenses)+(Non Operating Expenses) ...... (II)

Substitute $70 M for Operating Expenses and $35 M for Non Operating Expenses in Equation (II).

Total Expenses=$70 M+$35 M=$105 M

Write the expression to calculate the profit before taxes.

Profit Before taxes=(Total Revenue)−(Total Expenses) ...... (III).

Substitute $160 M for Total Revenue and $105 M for Total Expenses.

Profit Before taxes=$160 M−$105 M=$55 M

Calculate the profit after tax

Profit after tax=$55 M−$7.5 M=$47.5 M.

Conclusion:

Thus, the net profit for the year is $47.5 M.

Answer 13

To determine

(b)

The income statement.

Expert Solution

Answer to Problem 25P

The income statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Explanation of Solution

Calculation:

Make the Income Statement Table.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Conclusion:

Thus, the Income Statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Answer 14

To determine

(b)

The income statement.

Answer 15

Expert Solution

Answer to Problem 25P

The income statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Calculation:

Make the Income Statement Table.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

Conclusion:

Thus, the Income Statement table is shown below.

Particulars	Amount
Total Operating Revenue	$124
Less: Total Operating Expense	$70
Operating Revenue	$54
Non-Operating Revenue and Expenses
Total Non-Operating Revenue	$36
Less: Total Non-Operating Revenue	$35
Non-Operating Revenue	$1
Net Income Before taxes	$55
Less: Income Taxes	$7.5
Net Profit/(Loss)	$47.5

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Answer 20

To determine

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

Expert Solution

Answer to Problem 25P

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Explanation of Solution

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Answer 21

To determine

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

Answer 22

Expert Solution

Answer to Problem 25P

The interest coverage ratio is 2.57.

The net profit ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Calculation:

Write the expression to calculate the Total income.

Total Income=(Total Revenue)−(All Expense) ...... (IV)

Substitute $160 for Total Revenue and $70 for All Expenses in Equation (IV).

Total Income=$160−$70=$90

Write the expression to calculate the Interest Coverage Ratio.

Interest Coverage Ratio=Total IncomeInterest Payment ...... (V)

Substitute $90 for Total Income and $35 for interest payment in Equation (V).

Interest Coverage Ratio=$90$35=2.57

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Write the expression to calculate the net profit ratio.

Net Profit Ratio=(Net ProfitNet Sales) ...... (VI)

Substitute $47.5 for Net Profit and $48 for Net Sales in Equation (VI).

Net Profit Ratio=($47.5$48)=0.9896=(0.9896×100)%=98.96%.

Conclusion:

The interest coverage ratio is 2.57.

The net profit Ratio is 98.96%.

Since, the Interest coverage ratio for an industrial firm should be at least 3 but the obtained interest coverage ratio is less than 3.

Hence it is not acceptable.

Answer 27

Ch. 17 - Prob. 1QTC Ch. 17 - Prob. 2QTC Ch. 17 - Prob. 3QTC Ch. 17 - Prob. 1P Ch. 17 - Prob. 2P Ch. 17 - Prob. 3P Ch. 17 - Prob. 4P Ch. 17 - Prob. 5P Ch. 17 - Prob. 6P Ch. 17 - Prob. 7P

(a) The net profit for the year.

(a) The net profit for the year.

Answer to Problem 25P

Explanation of Solution

(b) The income statement.

Answer to Problem 25P

Explanation of Solution

(c) The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.

Answer to Problem 25P

Explanation of Solution

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Chapter 17 Solutions

(a)

The net profit for the year.

(b)

The income statement.

(c)

The interest coverage ratio and net profit ratio, whether the interest coverage ratio is acceptable or not.